Barry Diller and John Malone Go Their Separate Ways

Big news in the business world today with the revelation that New Establishment stalwarts Barry Diller and John Malone have agreed to tear asunder their relationship for good—or at least for the time being. The unusually straightforward agreement—Malone has long history of engineering indecipherable financial transactions—gives Malone’s Liberty Media $220 million in cash and two of IAC’s operating units, the Web sites Evite and Gifts.com, in exchange for Liberty’s 12.8 million shares of IAC. The deal leaves Diller as IAC’s largest individual shareholder, with 34 percent of the shares outstanding.

Buried in the announcement—nearly 600 words in—was this jaw-dropper: Diller is stepping down as IAC chief executive. In the press release, Diller said, “It's been clear to me for some time that [IAC] needs a full time aggressive and aspirational executive in the CEO role.”

Say what?Aggressive and aspirational? Those would be two qualities that Diller is especially renowned for. In fact, we can only imagine the way he must scream at the deck hands aboard his 305-foot luxury schooner, Eos. The key words are “full time.” Thanks to the sniping of at least one disgruntled employee, Diller lately has been portrayed as a free-spirited gallivant, distributing IAC’s petty cash on the high seas and aboard his Bombardier BD-700. With his 70th birthday just two years off, perhaps Diller is beginning to wind things down. Just two months ago, he announced his resignation as the chairman of Live Nation. Whatever Diller is privately thinking, the news is all the more surprising given that it comes barely a month after he parlayed IAC’s control of the Daily Beast into a half-stake in Newsweek.

Diller described his 17-year association with Malone as “a great, and occasionally, wild ride.” Malone, you may recall, was the one who quipped a few years ago that IAC stock would likely be lower were it not for a “a 20 percent Barry premium.” But for all the hype surrounding Diller and IAC, the reality is that the company—with just a $3 billion market capitalization—is really just a bit player in the new-media landscape. Even upstart Groupon is worth $6 billion, at least by Google’s accounting.

In 2007, The Wall Street Journal wondered whether Diller and Malone’s tempestuous relationship could be salvaged after years of endless bickering that occasionally ended up in court.